Employer of Record in Turkey services allow foreign companies to hire employees in Turkey without first establishing their own local company. Under an EOR arrangement, a Turkish company becomes the employee’s legal employer and manages local employment requirements such as employment contracts, payroll, social security registration, statutory payments and ongoing employment administration, while the foreign company manages the employee’s day-to-day business activities.
However, Employer of Record should not be understood as a separate legal category specifically created under Turkish legislation. There is no dedicated “EOR law” in Turkey that comprehensively defines or regulates Employer of Record services as a standalone employment model. EOR is primarily a commercial term used to describe an arrangement involving a local employer, a foreign client and employees working for that client’s business.
This distinction matters. The legal and tax consequences of an EOR arrangement depend on how the relationship is actually structured and operated. Turkish employment law, social security legislation, tax rules, work permit requirements, data protection rules and other applicable legislation continue to apply.
This guide explains how Employer of Record services work in Turkey, the legal structure behind an EOR arrangement, payroll and employer costs, VAT, working hours, employee benefits, foreign employees, termination, permanent establishment considerations and when establishing a Turkish company may be more appropriate.
What Is an Employer of Record in Turkey?
An Employer of Record is a local company that formally employs an individual who performs work for another business.
In a typical Turkey EOR arrangement, the Turkish EOR provider enters into the employment agreement with the employee and becomes the employee’s legal employer. The employee is registered with SGK through the EOR company and is included in its Turkish payroll.
The foreign client, meanwhile, normally determines the employee’s commercial role, responsibilities, objectives and day-to-day work.
The EOR provider typically handles matters such as employment documentation, payroll calculations, salary payments, social security registrations and filings, payroll taxes, statutory employment administration, leave records, benefits administration and the employment aspects of termination.
This creates an important distinction between legal employment administration and operational management.
The employee may be working entirely for the foreign client’s business while remaining legally employed and paid by the Turkish EOR company.
Can a Foreign Company Hire Employees in Turkey Without Establishing a Company?
An EOR structure may allow a foreign company to employ personnel in Turkey without first incorporating its own Turkish subsidiary.
For example, a foreign technology company may identify a sales professional, engineer or other employee located in Turkey but may not yet have sufficient Turkish operations to justify establishing and maintaining a separate Turkish company.
Instead of incorporating immediately, it may engage a Turkish EOR provider.
The process generally involves the foreign company selecting the employee, agreeing the commercial terms with the EOR provider and funding the employment costs. The EOR then concludes the local employment agreement, completes the required SGK registration, processes monthly payroll and pays the employee.
This can be particularly useful where a company is making its first hires, testing the Turkish market, conducting a project for a limited period or building a small local team before deciding whether to establish its own entity.
However, using an EOR should not be viewed as a universal substitute for company formation. As the size and nature of the Turkish operation develops, establishing a Turkish subsidiary may become commercially, operationally or legally more appropriate.
Is Employer of Record Legal in Turkey?
This question requires more explanation than a simple yes or no.
Turkish legislation does not currently contain a specific statutory regime called “Employer of Record”. There is no single EOR law establishing EOR as an independent employment category.
Accordingly, an EOR arrangement has to be analysed through the existing Turkish legal framework.
Depending on the circumstances, this can include:
- Labour Law No. 4857;
- Turkish Code of Obligations No. 6098;
- Social Insurance and General Health Insurance Law No. 5510;
- Unemployment Insurance Law No. 4447;
- Occupational Health and Safety Law No. 6331;
- International Labour Force Law No. 6735;
- Personal Data Protection Law No. 6698;
- Turkish tax and VAT legislation; and
- other legislation applicable to the employee, employer, profession or activity concerned.
The absence of a dedicated EOR law does not by itself mean that an EOR arrangement is prohibited. Equally, it would be inaccurate to suggest that Turkish legislation expressly recognises and regulates EOR as a separate legal model.
The substance of the arrangement therefore matters.
EOR Should Not Automatically Be Equated With Temporary Employment
Another important distinction is between an internationally used EOR arrangement and the temporary employment relationship (geçici iş ilişkisi) specifically regulated under Article 7 of Labour Law No. 4857.
Temporary employment relationships and private employment agency activities are subject to their own statutory conditions and limitations.
For this reason, an EOR arrangement should not simply be described as the Turkish equivalent of the temporary employment relationship regulated under Article 7.
The contractual structure, the identity of the employer, the functions performed by the employee, the degree of direction exercised by the client and the actual operation of the arrangement should all be considered.
This is particularly important because commercial terminology does not determine the legal classification of a relationship under Turkish law.
How Does an Employer of Record in Turkey Work?
A typical EOR engagement begins after the foreign company has identified the person it wants to hire.
The parties first determine the employee’s position, gross or net remuneration, benefits, working arrangement, expected start date and other employment conditions.
The EOR provider then collects the necessary employee documentation and prepares the Turkish employment agreement.
Before employment begins, the employee is registered with SGK in accordance with the applicable registration requirements.
During employment, the EOR processes payroll each month. Employee social security contributions, income tax, unemployment insurance contributions and other statutory deductions are calculated through the payroll.
The EOR also calculates and pays the employer-side statutory costs.
The foreign client normally funds these employment costs together with the EOR service fee and other applicable amounts.
The EOR subsequently handles the local employment administration while the client continues managing the employee’s business activities.
When employment ends, the termination must also be implemented under Turkish employment law rather than simply ending the commercial EOR agreement.
Employee Onboarding With an Employer of Record in Turkey
Employee onboarding in Turkey is not limited to signing an employment agreement. Before the employee can be placed on payroll and registered with the Social Security Institution (SGK), the employer normally needs to collect a basic personnel file and confirm the information required for payroll, social security and employment administration.
The exact documentation may vary depending on the employee’s role, workplace and any additional background or occupational health requirements. For a standard Turkish employee, the onboarding file commonly includes:
- Copy of the employee’s Turkish ID card
- Residence certificate (ikametgâh belgesi)
- Population registry extract (nüfus kayıt örneği)
- Diploma or graduation certificate, where relevant
- Criminal record certificate, where a background check is requested or relevant to the role
- Health report
- Passport-style photograph
- Bank account details for salary payment
- Contact information
- Information required for payroll, benefits and statutory employment records
Additional documentation may be required depending on the position. Regulated professions, technical roles, field assignments, driving duties or workplace-specific health and safety requirements may require further licences, certificates, training records or medical documentation.
Background Check Documents
A criminal record certificate is not a universal statutory onboarding requirement for every employee.
Where a background check is requested by the client or justified by the position, the relevant document may be collected for that purpose. Any personal data obtained during the process should be handled in accordance with Turkish data protection rules and should not be retained longer than necessary for the relevant purpose.
Health Report
A health report may form part of the employee’s occupational health and safety onboarding.
The scope of the medical assessment may depend on the workplace, the risk classification of the work and the employee’s duties. For technical, field-based or higher-risk positions, additional occupational health requirements may apply.
Payroll and Salary Information
The salary structure should also be finalized before onboarding is completed.
This includes confirming whether the remuneration is agreed on a gross or net basis and identifying any additional components such as:
- bonuses;
- meal allowance;
- transportation allowance;
- private health insurance;
- company vehicle;
- regular allowances; or
- recurring business expense arrangements.
These items should be reviewed before the first payroll because their tax, social security and payroll treatment may differ.
The employment agreement, payroll setup and commercial terms agreed with the foreign client should be consistent from the beginning.
How Long Does EOR Onboarding Take?
Where the employee documents are complete and the employment terms have already been agreed, onboarding can often be completed quickly.
However, the process should ideally begin before the intended start date. The EOR provider still needs to review the employment terms, prepare the Turkish employment agreement, collect the personnel documents, establish the payroll record and complete the required SGK notification.
As a practical matter, allowing approximately one to two weeks before the intended start date provides sufficient time for a normal onboarding process, although urgent onboarding may be possible in straightforward cases.
SGK Registration Before the Employee Starts Work
The employee’s SGK employment registration is one of the key onboarding steps.
As a general rule, the employee must be registered with SGK before commencing employment, subject to the statutory notification rules applicable to the particular workplace and employment.
For this reason, the employee should not begin working informally while the employment agreement, payroll setup or SGK registration is still pending.
A properly managed EOR onboarding process should ensure that the employment contract, SGK registration, payroll record and personnel documentation are aligned from the employee’s first working day.
Employment Contracts Under an EOR Arrangement
The fact that an employee is hired through an EOR does not remove the application of Turkish employment law.
The employment agreement should reflect the actual employment relationship and address matters such as the employee’s position, workplace, salary, working hours, benefits, probation period where applicable, confidentiality and other employment conditions.
Whether the agreement should be for an indefinite or fixed term also requires consideration.
Under Turkish employment law, fixed-term employment agreements cannot simply be used indefinitely as an alternative to indefinite employment. The legal requirements for fixed-term employment and successive renewals should be considered separately.
Remote and hybrid working arrangements may also require additional contractual provisions.
Foreign companies should therefore avoid assuming that a global employment agreement can simply be translated into Turkish and used without adapting it to Turkish law.
For a detailed explanation of contract types, mandatory provisions, fixed-term agreements, probation periods, foreign-currency salaries and other contractual requirements, see our guide to Employment Contracts in Turkey.
Payroll With an Employer of Record in Turkey
For 2026, the monthly minimum SGK contribution base is TRY 33,030, while the monthly maximum contribution base is TRY 297,270. Social security contributions are calculated on the employee’s earnings subject to SGK within these limits.
For employees covered under the standard 4/1(a) employment insurance system, the general social security contribution rates are as follows:
| Contribution | Employee Share | Employer Share | Total |
|---|---|---|---|
| Disability, Old-Age and Survivors Insurance | 9% | 12% | 21% |
| General Health Insurance | 5% | 7.5% | 12.5% |
| Short-Term Insurance Branches | – | 2.25% | 2.25% |
| Unemployment Insurance | 1% | 2% | 3% |
| Total | 15% | 23.75% | 38.75% |
These are the standard statutory rates before taking into account any employer-side incentives, reductions or special insurance arrangements that may apply.
The distinction between the employee and employer shares is important when calculating EOR costs. The employee’s 15% share is deducted through payroll from the employee’s gross salary; it is not an additional employer cost. By contrast, the employer share is calculated on top of the employee’s gross salary and therefore forms part of the employer’s employment cost.
For example, ignoring the SGK ceiling and any applicable incentives, an employee with a gross salary of TRY 100,000 would have TRY 15,000 of employee-side social security and unemployment insurance contributions deducted through payroll. The standard employer-side contribution would be TRY 23,750 in addition to the gross salary.
Accordingly, the starting employment cost would be:
TRY 100,000 gross salary + TRY 23,750 employer contributions = TRY 123,750
before considering income tax treatment, benefits, allowances, expenses, applicable incentives, the EOR service fee and VAT.
The applicable employer cost should therefore not be estimated merely by adding an EOR fee to the employee’s gross salary..
Income Tax and Why Net Salary Can Change During the Year
Employment income in Turkey is subject to progressive income taxation.
For 2026, employment income moves through rates of 15%, 20%, 27%, 35% and 40% as the employee’s taxable income reaches the applicable thresholds.
This is important for foreign employers accustomed to relatively stable monthly net salary calculations.
An employee’s income tax burden may increase during the year as cumulative taxable employment income enters higher tax brackets. Consequently, an employee hired on a fixed gross salary may receive a different net amount later in the year.
If the commercial agreement instead guarantees a particular net salary, the employer cost may increase as the employee moves into higher income tax brackets.
The distinction between gross and net salary should therefore be clearly understood before the employment offer is finalized.
Social Security Contributions
Employees working under a standard Turkish employment relationship are generally registered under Article 4/1(a) of Social Insurance and General Health Insurance Law No. 5510.
Both employee and employer contributions are calculated through payroll, subject to the applicable contribution base, exemptions and incentives.
For 2026, the monthly SGK contribution base ranges from TRY 33,030 to TRY 297,270 for standard private-sector employees.
Not every payment made to an employee is necessarily treated identically for social security purposes. Certain benefits may benefit from full or partial exclusions within statutory limits, while payments that do not qualify for an exclusion may become part of the contribution base.
Benefits should therefore be structured and processed correctly rather than simply paid outside payroll.
Working Hours and Overtime in Turkey
Working time is one of the areas where foreign companies frequently encounter problems.
The general statutory weekly working time under Turkish employment law is 45 hours.
Working arrangements should also account for daily working-time limits, weekly rest requirements, overtime rules and special restrictions applicable to particular employees or types of work.
Overtime exceeding the normal statutory weekly working time is generally subject to increased compensation. Turkish legislation also contains an annual 270-hour overtime limitation.
However, exceeding statutory working-time limits should not be treated merely as a payroll calculation issue. Paying additional overtime does not automatically eliminate employment-law, occupational-health-and-safety or working-time compliance risks.
This becomes particularly important for project employees working long rotations or regularly performing substantial overtime.
An EOR arrangement does not make otherwise problematic working hours compliant simply because the additional hours are paid.
Weekly Rest and Public Holidays
Employees are entitled to statutory weekly rest.
Separate rules also apply when employees work on national and public holidays.
Foreign clients should therefore avoid treating all calendar days as ordinary working days when establishing project schedules or daily-rate arrangements.
Where an employee works on a public holiday or under a working pattern involving Sundays or other rest days, payroll treatment should be reviewed under Turkish law.
This can materially affect employment costs for engineering, construction, inspection, energy and other project-based assignments involving intensive schedules.
Annual Leave With an Employer of Record in Turkey
Employees become entitled to statutory paid annual leave after completing at least one year of service with the employer, including any probation period.
Under Turkish Labour Law, the minimum annual paid leave entitlement is based on the employee’s length of service:
| Length of Service | Minimum Annual Leave |
|---|---|
| 1 to 5 years (inclusive) | 14 days |
| More than 5 years but less than 15 years | 20 days |
| 15 years or more | 26 days |
These are statutory minimums. The employment agreement or an applicable collective bargaining agreement may provide employees with longer annual leave entitlements.
There is also a special rule based on age: employees who are 18 years old or younger, or 50 years old or older, must receive at least 20 days of annual paid leave, regardless of whether their length of service would otherwise result in the 14-day minimum.
Weekly rest days, national holidays and public holidays that fall within the annual leave period are not counted as part of the statutory annual leave entitlement. For example, an employee taking 14 days of annual leave may be away from work for longer than 14 calendar days once intervening weekly rest days and public holidays are taken into account.
Annual leave may be divided by agreement between the employer and employee, but at least one part of the leave must be 10 days or longer.
When using an Employer of Record in Turkey, the foreign client’s internal leave policy does not replace these statutory rights.
Unused statutory annual leave also cannot simply be cancelled or written off. Upon termination of employment, the employee is entitled to payment for accrued and unused annual leave in accordance with Turkish employment law.
Accurate leave records should therefore be maintained throughout the EOR employment relationship, particularly where the foreign client operates its own global HR or leave-management system.
For a more detailed explanation of eligibility, calculation, use and payment of unused leave, see our guide to Annual Leave in Turkey.
Sick Leave
Employee sickness also interacts with Turkish social security and employment rules.
Depending on the duration and circumstances of the incapacity, temporary incapacity payments may be available through SGK, while the employment and payroll consequences need to be considered separately.
Foreign companies should not automatically apply the sick-pay policy used in their home jurisdiction to Turkish employees without reviewing the local rules.
Employee Benefits and Expenses
EOR arrangements often include benefits beyond salary.
These may include meal allowances, transportation allowances, private health insurance, bonuses, company vehicles, mobile phone costs and legitimate business expenses.
Each item should be reviewed separately because its tax, SGK and payroll treatment can differ.
The documentation is also important.
A payment being described commercially as an “expense reimbursement” does not necessarily mean it can automatically be paid tax-free or outside payroll.
The nature of the expense, supporting documentation, invoice recipient and relationship to the employee’s work should be considered.
This becomes particularly important with recurring costs such as vehicle rentals, transportation allowances and regular employee reimbursements.
Foreign Currency Salaries With an Employer of Record in Turkey
Foreign companies frequently ask whether an employee hired in Turkey can have a salary denominated in EUR, USD or another foreign currency.
The answer depends on both the employee and the employer.
As a general rule, Turkish residents cannot freely denominate employment contract payments in foreign currency or index them to foreign currency. However, Communiqué No. 2008-32/34 on Decree No. 32 contains important exceptions.
Foreign Employees
Where an employee residing in Turkey is not a Turkish citizen, the employment contract may provide for the salary and other payment obligations in foreign currency or indexed to foreign currency.
Article 8(14) of Communiqué No. 2008-32/34 specifically permits foreign-currency or foreign-currency-indexed remuneration in employment contracts to which a Turkey-resident person who does not have Turkish citizenship is a party.
Accordingly, a foreign national employed in Turkey may fall within this exception.
Turkish Employees Working for Foreign-Owned Companies
A separate and particularly important exception applies to certain foreign-owned or foreign-controlled employers in Turkey.
Under Article 8(19) of Communiqué No. 2008-32/34, employment and service agreements may be denominated in or indexed to foreign currency where the employer or service recipient in Turkey is:
- a branch, representative office, office or liaison office of a person established outside Turkey;
- a Turkish company in which persons established outside Turkey directly or indirectly hold 50% or more of the shares; or
- a Turkish company under the common control and/or control of persons established outside Turkey.
The same provision also covers companies operating in free zones in relation to their free-zone activities.
Importantly, this exception concerns the status of the employer, rather than the nationality of the employee. Therefore, a Turkish citizen can also have a foreign-currency-denominated employment contract where the Turkish employer falls within Article 8(19).
What Does This Mean for an EOR Arrangement?
This distinction can have a direct impact on EOR structures.
For example, if a foreign company owns 100% of its Turkish subsidiary, that subsidiary can generally fall within the Article 8(19) exception and may therefore enter into a USD- or EUR-denominated employment contract with a Turkish employee.
The position may be different where the employee is hired through an independent Turkish EOR company that does not itself satisfy the foreign ownership or control conditions.
The fact that the EOR’s client is a foreign company does not automatically transform the EOR into a company with 50% or more foreign ownership or foreign control. The actual employer under the employment agreement must therefore be considered when determining whether the Article 8(19) exception is available.
Accordingly, a Turkish employee hired through a locally owned Turkish EOR provider should not automatically be offered a USD- or EUR-denominated salary merely because the ultimate client is based abroad.
By contrast, where the employee is a foreign national, the separate exception applicable to non-Turkish citizens may be available.
Foreign companies should therefore determine the applicable foreign-exchange exception before agreeing the salary currency with the candidate. A salary arrangement that may be permissible for the foreign company’s own Turkish subsidiary may not necessarily be available under an independent EOR structure.
Hiring Foreign Employees Through an Employer of Record in Turkey
An EOR can also be used to employ foreign nationals in Turkey. However, the process is different from hiring a Turkish employee because, as a general rule, the foreign national must first obtain the appropriate Turkish work authorization before commencing employment.
When using an Employer of Record in Turkey, this is particularly important because the work permit application is assessed in relation to the Turkish employer that will employ the foreign national. The fact that the ultimate client is a large multinational company established abroad does not, by itself, satisfy the Turkish employer-side work permit criteria.
Accordingly, before offering an EOR arrangement to a foreign national, the EOR provider should first determine whether the proposed employee and the Turkish employing entity can satisfy the applicable work permit requirements.
The Five-Turkish-Employees Rule
Under the Ministry of Labour and Social Security’s general evaluation criteria, an employer subject to the balance-sheet basis is generally expected to employ at least five Turkish citizens for each foreign national for whom a work permit is requested.
However, describing this simply as an absolute “5:1 rule” is misleading because the current work permit system contains several exceptions, sector-specific rules and exemptions.
For example, where a workplace had net sales of at least TRY 50 million in the previous year, the employment criterion is not applied for work permit applications concerning up to five foreign employees.
There are also special criteria for certain sectors and occupations, including qualifying IT positions, education and other specifically regulated activities. For example, certain specialist IT positions can benefit from exemptions from the standard employment and financial eligibility criteria.
The applicable rule should therefore be checked against the employer, employee, occupation and sector rather than assuming that every foreign hire requires five additional Turkish employees.
Financial Eligibility of the Turkish Employer
The Turkish employer may also need to satisfy financial eligibility criteria.
Under the current general criteria, a newly established employer subject to the balance-sheet basis must generally have at least TRY 500,000 of paid-in capital.
For an existing employer with at least one completed year-end balance sheet and income statement, the general financial criterion can currently be satisfied through one of the following:
- paid-in capital of at least TRY 500,000;
- net sales of at least TRY 8 million; or
- exports of at least USD 150,000.
These requirements are especially relevant in an EOR arrangement because it is the Turkish employing company — rather than simply the foreign client — whose eligibility needs to be considered.
Minimum Salary Requirements for Foreign Employees
The salary offered to the foreign employee must also satisfy the Ministry’s work permit criteria.
The required minimum is calculated by reference to the gross minimum wage in force on the work permit application date and varies according to the position:
| Position | Minimum Salary for Work Permit Purposes |
|---|---|
| Senior executives and pilots | 5 × gross minimum wage |
| Engineers and architects | 4 × gross minimum wage |
| Other managers | 3 × gross minimum wage |
| Jobs requiring expertise or mastery | 2 × gross minimum wage |
| Other occupations and domestic work | 1 × gross minimum wage |
These are work permit evaluation thresholds and should be considered when the employment package is being agreed with the foreign candidate.
Important Exceptions to the General Criteria
The general employment and financial criteria do not apply in exactly the same way to every foreign national.
For example, under criteria effective from 3 August 2026, certain foreigners who have legally remained in Turkey for at least one year during the previous three years under a work permit, residence permit or international protection status may, subject to the applicable conditions, benefit from an exemption from the employment and financial eligibility criteria for up to three foreign employees at the same workplace.
In such cases, the number of foreign employees working under this mechanism generally cannot exceed the number of Turkish citizens employed at the same workplace. Different rules apply from the fourth qualifying foreign employee onwards.
The Ministry also provides broader exemptions from the employment, financial eligibility and salary criteria for certain categories of foreign nationals, including, subject to the relevant conditions, long-term residence permit holders, certain foreigners with close Turkish family connections and other specifically listed categories.
Work Permit Eligibility Should Be Checked Before EOR Onboarding
For this reason, a foreign national should not be treated as an ordinary EOR onboarding case before work permit eligibility has been reviewed.
The practical sequence should normally be:
Work permit eligibility review → work permit application → approval → employment commencement and SGK registration → payroll
The employee’s nationality and immigration status, proposed occupation and salary should be reviewed together with the Turkish EOR company’s headcount and financial position before confirming that the employment can proceed.
Foreign companies should therefore avoid making an unconditional Turkish start-date commitment to a foreign candidate before the work permit position has been assessed.
For a detailed explanation of application procedures, eligibility requirements, employer criteria, salary thresholds, required documents and exemptions, see our Work Permit in Turkey Guide.
VAT Treatment of Employer of Record in Turkey Services
VAT is one of the most important — and frequently overlooked — cost issues in a Turkey EOR arrangement.
A common assumption is that no Turkish VAT should apply because the EOR customer is a company established outside Turkey.
That assumption can be incorrect.
A Foreign Customer Does Not Automatically Mean VAT Exemption
Turkish VAT legislation provides an exemption for qualifying exported services. However, issuing an invoice to a foreign company is not, by itself, sufficient.
For a service to qualify for the service-export exemption, the service must be supplied to a customer abroad and the service must be enjoyed or utilized abroad.
The Turkish Revenue Administration explains the latter condition by considering whether the service relates to the foreign customer’s activities abroad rather than its activities in Turkey.
This distinction is highly relevant to EOR.
Consider a foreign company that hires an employee located in Turkey through a Turkish EOR.
The employee works in Turkey. The employment agreement is with the Turkish EOR company. The employee is registered with Turkish SGK. Turkish payroll is processed. Turkish employment obligations are administered locally.
The fact that the commercial customer receiving the EOR invoice is incorporated in the United States, United Kingdom, Germany or another country does not automatically establish that the service is utilized abroad.
The actual nature and use of the service must be examined.
The Revenue Administration has similarly stated in other contexts that services supplied to foreign businesses can remain subject to Turkish VAT where those services relate to activities or transactions in Turkey.
Could EOR Be Treated as a Labour Supply Service for VAT Purposes?
There is another important issue.
Turkish VAT guidance contains specific rules concerning labour supply services (işgücü temin hizmetleri).
The Revenue Administration describes these arrangements by reference to personnel who are employed by the service provider but whose labour is made available to, and who can work under the direction and control of, the service recipient.
That description can have obvious similarities with certain EOR structures.
In a typical EOR arrangement, the employee has an employment agreement with the EOR provider but may perform day-to-day work under the operational direction of the foreign client.
This does not mean that every EOR arrangement must automatically be classified identically for every Turkish tax purpose. The actual contracts and operating structure should be examined.
However, the labour-supply rules create an important VAT consideration that EOR providers and foreign clients should not ignore.
Is VAT Calculated Only on the EOR Management Fee?
This is particularly important when comparing EOR quotations.
Suppose the monthly cost consists of:
- employee gross salary;
- employer SGK contributions;
- employee benefits;
- other employment costs; and
- an EOR service fee.
It may be tempting to assume that VAT applies only to the EOR provider’s management fee because the salary and employer costs are merely being “reimbursed” by the foreign client.
That conclusion should not be made automatically.
The Revenue Administration has previously considered labour-supply arrangements in which amounts relating to employees formed part of the overall consideration for the service. In one published ruling, the Administration expressly stated that employee meal, transportation and clothing costs paid to the service provider were included in the total amount relevant to the VAT treatment of the labour-supply service.
Accordingly, the fact that an EOR provider economically uses part of the amount received from its client to pay employee salaries, employer social security contributions or employment expenses does not necessarily mean those amounts fall outside the VAT base.
This requires analysis of the contractual and invoicing structure.
Reimbursement and VAT Are Not Necessarily the Same Question
This distinction is frequently misunderstood.
A foreign company may view the employee’s salary as a simple pass-through amount:
“The EOR is not earning the salary. We are merely reimbursing the EOR for paying our employee.”
Commercially, that description may appear reasonable.
For VAT purposes, however, the question is not limited to the EOR provider’s accounting margin.
If the EOR is legally responsible for employing the individual, paying the salary and employer costs, and provides the resulting employment arrangement to its customer for an agreed total consideration, the VAT treatment of the amounts recharged to the client requires separate analysis.
Therefore, service fee, VAT base and accounting profit should not be treated as interchangeable concepts.
Practical Implication When Comparing EOR Quotations
Foreign companies should therefore avoid comparing Turkish EOR providers solely by looking at the headline management fee.
For example, two providers may both quote an EOR fee of EUR 300 per employee, while applying materially different VAT assumptions to employee costs.
Companies should understand:
- whether Turkish VAT is being charged;
- whether the provider claims a service-export exemption;
- which amounts are included in the VAT base;
- how employee salary and employer costs are treated;
- how benefits and reimbursements are treated; and
A lower headline EOR fee does not necessarily result in a lower total employment cost.
How Much Does an Employer of Record in Turkey Cost?
The true monthly cost of an EOR employee should generally be considered as several separate components rather than a single fee.
A typical cost structure can include:
Gross salary + employer statutory costs + benefits and expenses + EOR service fee + applicable VAT
The precise amount depends on the employee’s salary, SGK contribution base, benefits, payroll tax position, incentives where available, contractual structure and VAT treatment.
For this reason, foreign companies should request a complete employment cost simulation rather than comparing providers only by their monthly EOR fee.
The cost simulation should also make clear whether the employee’s salary has been agreed on a gross or net basis.
Terminating an Employee Hired Through an EOR
Using an EOR does not allow a foreign client to bypass Turkish termination rules.
The commercial relationship between the foreign company and the EOR provider is separate from the employment relationship between the EOR company and the employee. A client’s decision to end an assignment therefore does not, by itself, automatically create a lawful termination of the employee’s Turkish employment agreement.
Before termination, the EOR provider should review the employee’s contract, length of service, reason for termination, job-security status, accrued annual leave and other relevant circumstances.
Depending on the case, termination may involve:
- statutory notice or payment in lieu of notice;
- severance pay;
- payment for accrued and unused annual leave;
- valid-reason requirements;
- just-cause termination rules;
- employee defence procedures in applicable cases;
- mandatory mediation; and
- potential reinstatement or other employment claims.
Where the employee falls within the statutory job-security regime, additional requirements may apply to an employer-initiated termination.
For this reason, foreign clients should ideally discuss a planned termination with their Employer of Record in Turkey before communicating the termination decision to the employee.
Notice Periods and Notice Pay
For indefinite-term employment agreements, Turkish Labour Law provides minimum statutory notice periods based on the employee’s length of service.
The statutory minimum periods are:
| Employee’s Length of Service | Minimum Notice Period |
|---|---|
| Less than 6 months | 2 weeks |
| 6 months to 1.5 years | 4 weeks |
| 1.5 years to 3 years | 6 weeks |
| More than 3 years | 8 weeks |
These are minimum periods and may be increased by the employment agreement.
Where an employer terminates an indefinite-term employment agreement in circumstances requiring notice, the employer can generally either allow the employee to work through the applicable notice period or terminate without waiting for the notice period by paying the corresponding notice pay.
Notice pay and severance pay are separate concepts. Depending on the circumstances, an employee may be entitled to both.
Notice rules should also not be applied mechanically to every termination. For example, a valid termination for just cause can have different consequences, while fixed-term employment agreements require a separate analysis.
For an EOR client, this means that requesting an employee’s immediate removal from the business may create an additional termination cost if the employment relationship cannot be ended without notice.
Severance Pay
Employees who meet the statutory requirements may become entitled to severance pay when their employment ends.
As a general rule, an employee must have completed at least one year of service with the employer before statutory severance entitlement can arise. However, completing one year does not mean severance is payable in every termination scenario; the reason and legal basis for termination must also qualify.
Where severance is due, the basic calculation is 30 days of the employee’s relevant gross remuneration for each completed year of service, with periods exceeding a full year calculated proportionately.
The calculation is not necessarily limited to the employee’s basic monthly salary. Regular monetary and measurable benefits provided to the employee, such as certain recurring meal, transportation or bonus payments, may also be included when determining the remuneration used for severance calculations.
2026 Severance Pay Ceiling
Turkish law imposes a statutory ceiling on severance pay calculated for each year of service.
For the period 1 July 2026 to 31 December 2026, the severance pay ceiling is:
TRY 73,729.87 per year of service
The ceiling applicable on the employee’s termination date is used in the statutory calculation.
Where the employee’s remuneration taken into account for severance purposes is below the ceiling, severance is calculated using the employee’s relevant remuneration. Where that remuneration exceeds the statutory ceiling, however, the employer is not legally required to calculate statutory severance pay on the amount exceeding the ceiling.
For example, assume an employee’s monthly remuneration relevant for severance purposes is TRY 150,000 and the employment terminates during the second half of 2026. Although the employee earns TRY 150,000, the statutory severance calculation can be limited to the applicable ceiling of TRY 73,729.87 for each full year of service.
For three complete years of service:
TRY 73,729.87 × 3 = TRY 221,189.61
would therefore be the statutory severance amount attributable to those three complete years, rather than TRY 450,000 based on the employee’s full TRY 150,000 monthly remuneration.
Periods exceeding complete years are calculated proportionately.
An employer may of course have a separate contractual or collective bargaining obligation that provides a more favourable entitlement. In the absence of such an additional obligation, however, the statutory severance ceiling limits the amount that must be paid under the statutory severance calculation.
This is particularly relevant for EOR arrangements involving highly paid employees, where assuming “one full monthly salary for every year of service” can significantly overstate the statutory severance liability.
Permanent Establishment Risk When Using an Employer of Record in Turkey
An EOR can solve an employment problem. It does not automatically solve every corporate tax problem.
In particular, using an EOR does not by itself guarantee that a foreign company cannot create a permanent establishment or other Turkish tax exposure.
Permanent establishment analysis depends on the activities actually carried out in Turkey, the applicable Turkish tax legislation and, where relevant, the applicable double tax treaty.
Factors can include the employee’s functions, authority, working arrangements, role in sales or contract negotiations, the existence of a fixed place available to the foreign enterprise and the broader business model.
The fact that the employee’s employment contract is technically signed by an EOR provider is only one element of the overall factual situation.
Companies hiring personnel who perform significant sales, management, contracting or revenue-generating functions in Turkey should therefore consider PE risk separately from the employment arrangement.
Employer of Record in Turkey vs Independent Contractor
Hiring an employee through an EOR and engaging an independent contractor are fundamentally different structures.
Under an EOR model, the individual is an employee of the Turkish EOR company. The employment relationship is therefore subject to Turkish payroll, social security, employment law and applicable statutory employee protections.
A genuine independent contractor, by contrast, provides services as an independent business rather than as an employee. In a typical arrangement, the contractor operates through an appropriate Turkish tax registration or company, enters into a B2B service agreement, invoices the foreign client for the services provided and manages their own tax and social security obligations.
The distinction is determined by more than the title of the agreement.
Simply describing an individual as a “consultant”, “freelancer” or “independent contractor” does not necessarily determine the legal character of the relationship if the actual working arrangement resembles employment.
Factors such as the degree of managerial control, integration into the client’s organisation, working-hour requirements, economic dependence, responsibility for delivering defined results, use of company equipment and the individual’s ability to organise their own work may become relevant when assessing the relationship. No single factor necessarily determines the outcome; the arrangement should be considered as a whole.
This means that a contractor structure should not be selected solely because it appears less expensive than employing the individual through an EOR.
A contractor model may be appropriate where the individual genuinely operates independently and provides defined services on a B2B basis. Where the company intends to control the individual’s day-to-day work in substantially the same manner as an employee, an employment structure may be more appropriate.
Foreign companies should therefore determine the intended working model first and then select the contractual structure that reflects how the relationship will actually operate.
For a detailed explanation of B2B service agreements, invoicing, tax responsibilities, international payments and contractor classification, see our guide on How Foreign Companies Can Work With Independent Contractors in Turkey.
Employer of Record in Turkey vs Establishing a Local Company
EOR and company formation solve different problems.
An Employer of Record in Turkey can be attractive where a foreign business wants to make a limited number of hires, test the market, run a project or begin operations before committing to a permanent local entity.
A Turkish subsidiary can become more appropriate where the company develops a substantial and permanent local operation, employs a larger workforce, requires its own commercial contracts, needs local licences, leases premises, holds assets or otherwise develops an independent Turkish business infrastructure.
There is no universal employee number at which a company must automatically switch from EOR to its own entity.
The decision should instead consider the scale, duration and nature of the Turkish operation.
When EOR May Not Be the Right Solution
EOR is not automatically the correct solution for every company entering Turkey.
A company expecting a substantial permanent operation from the outset may find that establishing its own entity provides greater operational control and a more appropriate long-term structure.
The same can apply where the Turkish activity requires licences or regulatory approvals that must be held directly by the operating company.
Companies should also reconsider long-term EOR arrangements where the Turkish team becomes a core part of the foreign company’s operations or where corporate tax and permanent establishment considerations become significant.
A good market-entry analysis should therefore compare EOR with subsidiary, branch and other available structures rather than assuming that EOR is always preferable.
Moving From EOR to Your Own Turkish Company
EOR can also form part of a phased market-entry strategy.
A foreign company may initially hire one or several employees through an EOR while evaluating the Turkish market.
If the operation grows, the company can subsequently incorporate its own Turkish subsidiary and transition the local employment structure.
That transition should be planned carefully because employees cannot simply be moved between employers as if they were assets.
Employment continuity, accrued rights, employee consent, termination and re-employment mechanics and the specific transfer structure should be considered.
For companies expecting eventual incorporation, discussing the transition strategy at the beginning of the EOR engagement can avoid unnecessary problems later.
How to Choose an EOR Provider in Turkey
The monthly management fee is only one part of an EOR provider comparison.
Foreign companies should also understand who will actually employ the worker, who performs the payroll, how SGK registrations are handled, how employment agreements are prepared, how employee expenses are processed and what happens if an employee must be terminated.
For foreign nationals, the provider’s ability to assess and manage work permit requirements is also important.
Tax treatment should be discussed as well, particularly the provider’s approach to VAT on EOR invoices and employee cost recharges.
Companies should also ask how the provider handles unusual situations such as long overtime schedules, foreign-currency remuneration, bonuses, private health insurance, company cars, employee disputes and the eventual transfer of employees to the client’s own Turkish company.
The objective should be to understand the entire employment structure rather than simply purchasing payroll administration.
Employer of Record in Turkey: Frequently Asked Questions
Is there a specific EOR law in Turkey?
No dedicated Turkish statute comprehensively defines Employer of Record as a standalone employment model. EOR is primarily a commercial term. The arrangement must therefore be structured and assessed under the existing employment, social security, tax, immigration and other applicable legislation.
Can a foreign company hire one employee in Turkey without opening a company?
An EOR arrangement may provide a local employment structure for this purpose. Whether EOR is appropriate should still be considered in light of the employee’s role and the foreign company’s broader activities in Turkey.
Who is the legal employer under an EOR arrangement?
Under a typical EOR structure, the Turkish EOR company enters into the employment agreement, registers the employee with SGK and operates the local payroll.
Who manages the employee’s daily work?
The foreign client normally directs the employee’s commercial activities and day-to-day responsibilities, while the EOR handles the local employment administration. The precise allocation of responsibilities should be clearly addressed contractually.
Does using an EOR eliminate permanent establishment risk?
No. PE and other corporate tax risks depend on the foreign company’s actual activities in Turkey and should be analysed separately.
Can an EOR hire foreign nationals?
Potentially, yes. However, the employee generally needs an appropriate Turkish work permit unless an exemption applies, and the relevant work permit criteria must be satisfied.
Is the five-Turkish-employees rule always applicable to foreign workers?
No. Turkey’s work permit system contains general employment criteria as well as exceptions and exemptions. Eligibility should be checked for the particular employee and employer.
Can an employee be paid in USD or EUR?
It may be possible depending on the parties and the applicable foreign-exchange rules and exceptions. The employment structure should be reviewed before agreeing foreign-currency remuneration.
Does an overseas client automatically avoid Turkish VAT?
No. The fact that the EOR customer is established abroad does not by itself establish eligibility for the Turkish service-export VAT exemption. Whether the service is utilized abroad is also relevant.
Is VAT necessarily calculated only on the EOR fee?
Not necessarily. Depending on the legal and tax characterization of the arrangement, amounts recharged in connection with the employees may also be relevant to the VAT base. Turkish Revenue Administration guidance concerning labour-supply services makes this an important issue to review.
Can an EOR employee work remotely?
Yes, remote employment can be structured, but the employment agreement and working arrangement should comply with the applicable Turkish requirements.
Can the foreign client terminate an EOR employee immediately?
The client may decide that it no longer requires the employee’s services, but termination of the Turkish employment relationship must still be implemented in accordance with applicable Turkish employment law.
Can employees later be transferred to the foreign company’s Turkish subsidiary?
A transition can be structured, but accrued employment rights, continuity and the legal mechanics of changing employer should be reviewed before implementation.
Employer of Record Services in Turkey
Employer of Record can provide foreign companies with a practical route to hiring employees in Turkey before establishing their own local entity.
However, EOR should not be treated merely as an administrative shortcut.
Turkey does not have a dedicated EOR law that removes the arrangement from the ordinary employment, social security and tax framework. The employment relationship remains subject to Turkish rules, while the EOR structure itself can raise additional questions concerning VAT, work permits, employee direction, termination and permanent establishment.
For this reason, companies considering EOR in Turkey should evaluate the complete structure: not only the monthly EOR fee, but also employment costs, payroll taxation, VAT treatment, contractual responsibilities, termination exposure and the employee’s actual role in Turkey.
Metropol Consulting provides Employer of Record, payroll, work permit and employment compliance support for foreign companies hiring personnel in Turkey. We can also support companies that later decide to establish their own Turkish entity and transition from an EOR structure to direct local employment.
Planning to hire employees in Turkey without establishing a local company? Contact Metropol Consulting to discuss the employment structure, payroll costs and compliance requirements for your planned hires.